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Will Coronavirus Woes in China Mar Coca-Cola (KO) Q1 Earnings?
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The Coca-Cola Company’s (KO - Free Report) China business, which contributes nearly 10% of its global volume, might have marred its overall performance in first-quarter 2020. The company will report first-quarter earnings on Apr 22.
Impacts of the Coronavirus Outbreak in China on Coca-Cola
China is Coca-Cola’s third-largest market in the world based on the unit case volume. The coronavirus outbreak that originated in China wreaked havoc in the country in January and February. This led to huge supply-chain disruptions in China due to travel restrictions as well as the closure of stores, movie halls and restaurants, cancellation of major sporting events, and promotion of social distancing to reduce the transmission of the virus. The containment efforts are likely to have marred the company’s revenues in the to-be-reported quarter.
Notably, Coca-Cola sources non-nutritive sweeteners and certain other ingredients from suppliers in China. The virus outbreak led to some delays in the production and export of the ingredients from the company’s suppliers in China. This is likely to have impacted Coca-Cola’s unit case production and exports in the first quarter.
On Feb 21, 2020, the company notified that the coronavirus outbreak will negatively impact its unit case volume and financial results for first-quarter 2020. It predicted that the coronavirus-related disruptions will hurt results for organic revenues by 1-2 percentage points, unit case volume by 2-3 percentage points and earnings per share by 1-2 cents.
Nonetheless, the company’s overall success in China has been solely driven by increased distribution, leading to growth in the sparkling drinks category. Further, it has been adapting to the new digital-first consumer strategy to expand the customer base in China.
Overall Expectations
The company’s efforts to drive growth through brand innovation, packaging and product launches are commendable. Additionally, it has been making investments to generate incremental revenues for increasing profits. Apart from this, its focus on acquisitions to strengthen the business portfolio and maintain solid brand recognition is impressive. All the factors are likely to have contributed to Coca-Cola’s results for the soon-to-be-reported quarter despite the headwinds posed by the coronavirus pandemic.
However, this Zacks Rank #4 (Sell) company expects the persistence of adverse currency rates to mar results in the first quarter of 2020. On the last earnings call, it predicted that unfavorable currency will affect first-quarter revenues by 2% and comparable operating income by 5%.
The Zacks Consensus Estimate for the company’s first-quarter earnings stands at 44 cents, suggesting a decline of 8.3% from the year-ago quarter’s reported figure. For first-quarter revenues, the consensus mark is pegged at $8.49 billion, suggesting a 5.9% increase from the prior-year quarter’s reported figure.
Monster Beverage Corporation (MNST - Free Report) , a Zacks Rank #2 (Buy) stock, has delivered a positive earnings surprise of 2.6%, on average, in the trailing four quarters.
Barfresh Food Group Inc. (BRFH - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for the current year has been stable in the past seven days.
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Will Coronavirus Woes in China Mar Coca-Cola (KO) Q1 Earnings?
The Coca-Cola Company’s (KO - Free Report) China business, which contributes nearly 10% of its global volume, might have marred its overall performance in first-quarter 2020. The company will report first-quarter earnings on Apr 22.
Impacts of the Coronavirus Outbreak in China on Coca-Cola
China is Coca-Cola’s third-largest market in the world based on the unit case volume. The coronavirus outbreak that originated in China wreaked havoc in the country in January and February. This led to huge supply-chain disruptions in China due to travel restrictions as well as the closure of stores, movie halls and restaurants, cancellation of major sporting events, and promotion of social distancing to reduce the transmission of the virus. The containment efforts are likely to have marred the company’s revenues in the to-be-reported quarter.
Notably, Coca-Cola sources non-nutritive sweeteners and certain other ingredients from suppliers in China. The virus outbreak led to some delays in the production and export of the ingredients from the company’s suppliers in China. This is likely to have impacted Coca-Cola’s unit case production and exports in the first quarter.
On Feb 21, 2020, the company notified that the coronavirus outbreak will negatively impact its unit case volume and financial results for first-quarter 2020. It predicted that the coronavirus-related disruptions will hurt results for organic revenues by 1-2 percentage points, unit case volume by 2-3 percentage points and earnings per share by 1-2 cents.
Nonetheless, the company’s overall success in China has been solely driven by increased distribution, leading to growth in the sparkling drinks category. Further, it has been adapting to the new digital-first consumer strategy to expand the customer base in China.
Overall Expectations
The company’s efforts to drive growth through brand innovation, packaging and product launches are commendable. Additionally, it has been making investments to generate incremental revenues for increasing profits. Apart from this, its focus on acquisitions to strengthen the business portfolio and maintain solid brand recognition is impressive. All the factors are likely to have contributed to Coca-Cola’s results for the soon-to-be-reported quarter despite the headwinds posed by the coronavirus pandemic.
However, this Zacks Rank #4 (Sell) company expects the persistence of adverse currency rates to mar results in the first quarter of 2020. On the last earnings call, it predicted that unfavorable currency will affect first-quarter revenues by 2% and comparable operating income by 5%.
Coca-Cola Company (The) Price and EPS Surprise
Coca-Cola Company (The) price-eps-surprise | Coca-Cola Company (The) Quote
The Zacks Consensus Estimate for the company’s first-quarter earnings stands at 44 cents, suggesting a decline of 8.3% from the year-ago quarter’s reported figure. For first-quarter revenues, the consensus mark is pegged at $8.49 billion, suggesting a 5.9% increase from the prior-year quarter’s reported figure.
Don’t Miss These Better-Ranked Beverage Stocks
National Beverage Corp. (FIZZ - Free Report) has posted a positive earnings surprise of 2.9%, on average, in the trailing four quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Monster Beverage Corporation (MNST - Free Report) , a Zacks Rank #2 (Buy) stock, has delivered a positive earnings surprise of 2.6%, on average, in the trailing four quarters.
Barfresh Food Group Inc. (BRFH - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for the current year has been stable in the past seven days.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>